Allens

Workplace Relations

Focus: Workplace Relations – February 2006

In this issue: we look at restraining unlawful industrial action; inconsistent enforcement of a dress policy; AWA restraint clauses; influence of contract terms on nature of relationship; and an AIRC order restraining the NSW Commission. 

United against workplace disruption

In brief: The Federal Court has granted an injunction restraining unlawful industrial action under the Building and Construction Industry Improvement Act 2005 (Cth). Senior Associate Simon Dewberry reports.

Background

United Group Infrastructure Pty Ltd provides mechanical and electrical services to various refineries. United's employees are covered by certified agreements and most are members of the Australian Manufacturing Workers' Union (AMWU).

United's employees and the AMWU had engaged in a long-running campaign of industrial action at the refineries. United estimated that, since December 2004, eight per cent of ordinary work hours had been lost at one of the refineries because of unlawful industrial action and that each day lost at that refinery cost the company $126,750 in fixed costs.

United sought an interim injunction restraining the AMWU and two of its officers from encouraging the industrial action.

Consideration

The Federal Court considered the implications of the Building and Construction Industry Improvement Act 2005 (Cth) (the BCII Act) which prohibits 'industrially motivated' industrial action.1

United sought the injunction under sections of the BCII Act that allow the court to grant injunctions where unlawful industrial action is either:

  • occurring; or
  • threatened, impending or probable.

United did not contend that industrial action was occurring, threatened or impending. Rather, United relied on the AMWU's past actions to argue that industrial action was sufficiently probable.

In finding for United, the court noted comments from an Australian Industrial Relations Commission (AIRC) decision that United's employees had a propensity to take industrial action. Further, the employees had already breached an AIRC order.

Since the matter was brought under the BCII Act, the Australian Building and Construction Commissioner (ABCC) intervened in the proceedings. The ABCC has a right to intervene in a case arising under the BCII Act or the Workplace Relations Act 1996 (Cth) (WRA) that involves a building and construction industry participant or building and construction industry work.

Implications

This decision is encouraging for employers in the building and construction industry faced with unlawful industrial action. Also, it is noteworthy that the ABCC is demonstrating a willingness to become involved in proceedings where breaches of the WRA and the BCII Act are alleged.

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Failure to enforce consistently renders policy unenforceable

In brief: The AIRC recently found that an attempt by an employer to enforce a nine-year-old dress policy was unreasonable. Lawyer John Naughton and Law Graduate Fiona McPhee report.

Background

Ms Miller had been employed by Woolworths Limited for 15 years. Throughout her employment, she wore a nose stud.

Woolworths introduced a dress policy for its Victorian staff in March 1996 and this policy was adopted nationally in May 2001. The dress policy allowed two sleepers per ear and no other visible body piercings.

In June 2005, Ms Miller was asked to remove the nose stud. After some formal counselling, Ms Miller was told her employment would be at risk if she continued to breach the company policy. Ms Miller complied under protest but raised a grievance under the Safeway Supermarkets (Victoria) Enterprise Agreement 2003.

Past practices

The Australian Industrial Relations Commission (AIRC) considered that Ms Miller's nose stud was unobtrusive, and observed that Ms Miller's work – filing and payroll queries – required only limited exposure to the public. The AIRC also noted that, if the policy was dispensed with in Ms Miller's case, there would be no ongoing and adverse consequences in relation to other Woolworths' employees.2

The most significant matter drawn on by the AIRC in its reasoning was Woolworths' long-standing failure to apply the dress policy.

Among other events, the AIRC highlighted that:

  • from the introduction of the Victorian policy in 1996 and the national policy in 2001, Ms Miller had four different store managers, none of whom ever raised the issue of Ms Miller's nose stud with her;
  • in 1999, Woolworths introduced a new uniform. At that time, managers were asked to ensure employees complied with the dress policy. However, they were advised not to take any disciplinary action against employees over jewellery worn in contravention of the policy where this had been worn since before 1998; and
  • during Ms Miller's employment with Woolworths, she had undergone regular employee performance appraisals. Ms Miller's appearance and compliance with company dress standards over several years had been described by managers as 'excellent' and 'acceptable, meets job requirements'.

The AIRC pointed out that the failure by Woolworths to apply the dress policy to Ms Miller was not isolated. It concluded that there had been 'a consistent failure to apply the policy over nine years by Store Managers and Performance Appraisal Assessors'. Consequently, the AIRC found that application of the policy to Ms Miller was unreasonable.

Implications

Non-enforcement of an employment policy may, over time, make that policy difficult or impossible to enforce later. While employers generally retain a right to change policies or practices on appropriate notice, the decision of the AIRC points to the need for employers to ensure that policies are applied consistently and are objectively justifiable if they are to form a basis for disciplinary action.

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AWA restraint clause held binding

In brief: The Federal Court has granted temporary orders restraining a former employee from soliciting the employer's customers in breach of a restraint clause contained in his AWA. Lawyer Nicky Friedman reports. 

Background

SULO MGB Australia Pty Ltd brought interlocutory proceedings against a former employee, Mr Harrison.3 SULO is a manufacturer and supplier of waste bins for general waste and recycling purposes, and its major competitor is Nylex Limited.

Mr Harrison was initially employed by SULO on 17 September 2001 as key account manager – contracts, reporting to Mr Kernahan. His employment contract included a standard restraint against the disclosure of confidential information.

In June 2005, Mr Harrison entered into an Australian Workplace Agreement (AWA). The AWA imposed a restraint in the following terms:

During your employment with the Company, and for a period of 3 months on the termination of your employment with the Company, you will not ... solicit or entice or endeavour to solicit or entice from the company ... any director, employee or contractor of or to the Company ... or any person who has during the period of your employment with the Company been a customer, supplier, distributor or licensee of the Company ...

Mr Harrison resigned from SULO on 20 September 2005, and commenced employment with Nylex on 4 October 2005. Mr Kernahan testified that, during the next few weeks, Mr Harrison contacted several major customers of SULO on behalf of Nylex, either providing quotations or seeking the opportunity to do so. In addition, Mr Kernahan claimed that, following Mr Harrison's move to Nylex, Nylex succeeded in displacing SULO's contract with the Ryde Council and that, in negotiating this deal, Mr Harrison had quoted prices that necessarily reflected Mr Harrison's knowledge of SULO's prices. Mr Kernahan gave evidence that Mr Harrison returned a file to him containing photocopies rather than the original versions of SULO's budgets, price lists, and sales plans.

Decision

Mr Harrison argued that he was not bound by the restraint in the AWA because:

  • the AWA should not have been approved, as it failed the 'no disadvantage' test; and
  • SULO had failed to explain the effect of the AWA (and, in particular, the restraint clause) to him when offering the AWA, in breach of section 170VPA(1)(c) of the Workplace Relations Act 1996 (Cth).

The court accepted that the AWA had been taken to have passed the 'no disadvantage' test, there having been no appeal against or challenge to the approval. As for the obligation to explain the AWA's effect, the court observed that Mr Harrison had confused this with the obligation to explain the AWA's content. The court observed that it was unlikely that the content of a document could be explained without reference to its effect. However, when considering temporary orders, it was better to leave this argument until the final hearing.

The court accepted that SULO had made out a viable case for an injunction and that Mr Harrison should be prohibited from continuing or endeavouring to entice SULO's customers until 20 December 2005 (ie the balance of the three-month restraint). The court explained that, although the injunction covered only a short time, it was nevertheless critical given the commercial circumstances of SULO and Nylex. In addition, pending argument at a final hearing, the court forbade Mr Harrison from using any confidential information he learned while at SULO.

Lessons

The decision shows that courts will be willing to uphold restraint clauses where they are reasonable, clearly drafted, and properly incorporated into employment agreements. In these cases, temporary orders will usually resolve the dispute as a final hearing is difficult to have before the restraint period lapses. Given the court's discretion, a claim that is neither oppressive nor vague stands a better chance of being upheld and protecting the employer from unfair competition.

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Independent contractor or employee? That is the question

In brief: The terms of the contract can influence substantially whether there is an employment relationship or an independent contract. Lawyer John Naughton and Articled Clerk Clare Eardley report.

Background

The Australian Security Company Pty Ltd (ASC) licensed contractors to carry out security services as directed by ASC. These contractors then delegated work to 'relief drivers'. The contractors charged for the work of the relief drivers as if the work had been performed by the contractors themselves. Only part of the fee paid by ASC to the contractors was passed on to the relief drivers.

Five complaints were made alleging that ASC had failed to pay wages for the work performed for ASC. All five complainants had worked as both contractors and relief drivers. As is the case in most jurisdictions, an employer's failure to pay wages is an offence.

Industrial magistrate's decision

The magistrate considered whether there was an employer/employee relationship between ASC and any of the complainants.

The magistrate dismissed two of the five complaints. Two other complaints were partially successful, to the extent that they related to work performed as relief drivers. ASC was found guilty of failing to pay wages in these cases, although no conviction was recorded.

The final complaint was wholly successful and involved periods when the complainant worked as a contractor and as a relief driver. Again, ASC was found guilty but no conviction was recorded.

ASC appealed to the Industrial Court of Queensland.

Appeal decision

The court allowed the appeal by ASC and set the convictions aside. In its judgment, the court considered the nature of the relationship (if any) between ASC and each person said to be an employee of ASC.4  

The court found that the licence agreement between ASC and the complainants, in their capacity as contractors, pointed decisively to a relationship other than one of employment, noting the following factors:

  • the licence agreement clearly stated that contractors were not employees of ASC;
  • the contractors had significant powers of delegation to the relief drivers;
  • the contractors were responsible for all costs relating to their employees;
  • ASC paid the contractors regardless of whether or not the contractor delegated the work to a relief driver; and
  • the contractors were obliged to supply and maintain their own motor vehicles.
Conclusions

The court applied the usual tests that determine whether a person should be classified as an employee or an independent contractor. It was the application of these tests that was determinative in the finding that the complainants were not employees of ASC. However, the court referred to earlier cases confirming that, when a relationship is not clearly of one type or another, the parties can resolve that ambiguity by an express statement of their intention.

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AIRC order restrains NSW Commission

In brief: A Full Bench of the AIRC has restrained the NSW Industrial Relations Commission from dealing with a dispute because the employees were covered by a federal award. Partner Jamie Wells and Lawyer Elena Tsangari report.

Background

There had been a long-standing dispute between Boeing Australia Limited and its employees at Williamtown in New South Wales. The dispute related both to terms and conditions of employment and the manner in which these were to be negotiated. Employees wished to negotiate a collective agreement with the Australian Workers' Union (AWU) as their representative. However, Boeing rejected these attempts and instead insisted on maintaining individual contracts.

Unhappy with the options under federal law, the AWU first notified a dispute to the NSW Industrial Relations Commission (NSWIRC) in January 2005 but this did not proceed following advice from Boeing that through its membership of the Australian Industry Group (AIG), it understood it was bound by the federal Metal, Engineering and Associated Industries Award 1998 (the Metal Industry Award ).

In March 2005, the AWU initiated a bargaining period in the Australian Industrial Relations Commission (AIRC). Significant protected action was taken and, during the course of 2005, the AWU also notified two disputes to the AIRC, and requested conciliation proceedings on six occasions. However, none of these steps were able to resolve the matters in dispute.

NSWIRC review

When the dispute was still unresolved by November 2005, the New South Wales Minister for Industrial Relations referred the dispute to the NSWIRC for an inquiry under section 146(1)(d) of the Industrial Relations Act 1996 (NSW).

The NSWIRC convened a 15-day inquiry and then delivered a report that concluded, in part, 'that there was virtually no prospect of the dispute being resolved between the parties themselves, nor is there any real likelihood that the current AIRC proceedings will resolve the dispute', and that 'the AWU is now prepared, however, to take steps to bring the strike to an end if the New South Wales Commission finds that it has jurisdiction to arbitrate the dispute'.

On 18 February 2006, the AWU notified Boeing and the AIRC that it no longer wished to negotiate an agreement in the federal jurisdiction, bringing the bargaining period to an end. The AWU then indicated that it would attempt to force Boeing to arbitration in the NSWIRC. In response, Boeing applied to the AIRC under s128 of the Workplace Relations Act 1996 (Cth) (WRA) for orders restraining the NSWIRC from dealing with the dispute.

Decision

Section 128(1) provides that, if it appears to the AIRC that a state industrial authority is dealing or is about to deal with:

(a) an industrial dispute;

(b) a matter provided for in an award, an order of the AIRC or a certified agreement; or

(c) a matter that is the subject of a proceeding before the AIRC;

other than by:

(d) facilitating the entering into of a state employment agreement; or

(e) approving a state employment agreement,

the AIRC may make an order restraining the state industrial authority from dealing with the industrial dispute or matter.

Boeing claimed that the AIRC's jurisdiction arose from issues (b) and (c). After an examination of the Metal Industry Award, the AIRC determined that the Award did apply and that Boeing was bound by it.

The AIRC accepted Boeing's submissions that, because Williamtown was covered by a federal award, there was the real potential for a clash between any arbitrated outcome in the NSWIRC and the Metal Industry Award. The AIRC also accepted Boeing's submission that the AWU could not use the federal system to obtain the benefit of protected industrial action, then seek to rely on the NSWIRC to resolve the dispute by arbitration.5

Comparative powers to arbitrate

The AIRC noted that the AWU's case implied that the AIRC should give away its authority to the NSWIRC because the NSWIRC had broader power to deal with industrial disputes. However, as this decision demonstrates, the AIRC will not be influenced by the character of a particular dispute (or the powers available to it), when deciding whether a party should be allowed to gain access to the state system through the back door.

Footnotes
  1. United Group Infrastructure Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2005] FCA 1926 (23 December 2005).
  2. B Miller v Woolworths Limited (t/as Safeway), Melbourne, 23 December 2005, Senior Deputy President Watson, PR967104.
  3. SULO MGB Australia Pty Limited v Harrison [2005] FCA 1871 (12 December 2005).
  4. Australian Security Company Pty Ltd v Gary John Bullock (C/2005/45); Australian Security Company Pty Ltd v Gary John Bullock (C/2005/46); Australian Security Company Pty Ltd v Gary John Bullock (C/2005/47); Gary John Bullock v Australian Security Company Pty Ltd (C/2005/43); Gary John Bullock v Australian Security Company Pty Ltd (C/2005/44), 23 January 2006, President Hall.
  5. Boeing Australia Limited v Australian Workers' Union, 23 February 2006, Justice Giudice, President, Vice President Lawler and Commissioner Larkin, PR968945.

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